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HomeMy WebLinkAboutItem C - Enterprise ZoneEUGENE CITY COUNCIL AGENDA ITEM SUMMARY Work Session: Economic Development Committee Recommendation on an Enterprise Zone Meeting Date: March 7, 2005 Agenda Item Number: C Department: Planning and Development Staff Contact: Denny Braud www. cl. eugene, or. us Contact Telephone Number: 682-5536 ISSUE STATEMENT This work session is a continuation of the February 16, 2005, City Council agenda item regarding the Mayor's Committee on Economic Development recommendation specific to designation of an Enterprise Zone in Eugene. BACKGROUND Information was provided in the February 16 Agenda Item Summary. RELATED CITY POLICIES Information was provided in the February 16 Agenda Item Summary. COUNCIL OPTIONS Three options have been identified: 1. Mayor's Committee Recommendation: Proceed with application to the State of Oregon in 2005. The boundary would include the prior (expired) West Eugene Enterprise Zone boundary, plus a limited amount of adjacent industrial property that was not included in the previous boundary (see Attachment A). Redevelopment, infill, and brownfield redevelopment projects would receive the standard (100%) three-year tax exemption. Greenfield development would be subject to additional job quality standards, with the last one-third of the tax exemption conditioned on job quality (minimum exemption = 66%, maximum exemption = 100%). Job quality standards would be adopted prior to establishment of the zone. Pros: - Supports Mayor's Committee recommendation - Addresses sustainability goals by providing the maximum benefit for redevelopment, infill, and brownfield redevelopment - Conditions greenfield development, and appears to adhere to State statutes and rules regarding the reasonableness of additional local conditions - Provides opportunity, if selected by the State, to have the enterprise zone operating on July 1, 2005 L:\CMO\2005 Council Agendas\M050307\S050307C.doc Cons: - Expect significant competition from the two expiring zones in the 2005 State application round 2. Restricted Boundary: Proceed with application to the State of Oregon in 2005, with a smaller, restricted boundary. Council previously considered an option that would eliminate greenfield development sites from the proposed boundary (see Attachment B). In this option, all eligible projects would be focused on redevelopment, infill, or brownfield redevelopment projects; therefore, all eligible projects would receive the standard (100%) three-year tax exemption. Pros: - Zone more focused on the City's sustainability goals. - Zone boundary could be expanded in the future if desired. - Opportunities for new construction are still available on vacant infill sites within the restricted boundary. - Restricted boundary would still include a majority of the area recommended by the Mayor' s Committee. - Provides opportunity, if selected by the State, to have the enterprise zone operating on July 1, 2005. - Reduces the City's administrative burden associated with monitoring compliance with additional local criteria. Cons: - May lose opportunity to attract high value, large job creation projects that are specifically seeking larger greenfield sites. - Not entirely consistent with the Mayor's Committee recommendation. - Expect significant competition from the two expiring zones in the 2005 State application round. 3. Defer Application to 2006: The council could consider making application to the State of Oregon in 2006, instead of this year. With two additional zones expiring in 2006, there will be an opportunity to apply next year. Pros: - Provides additional time to further develop City-wide sustainability goals and objectives. - Allows for the completion of the Buildable Lands Inventory analysis prior to application. Cons: - Delays establishment of a zone until July 1, 2006. - Not consistent with the Mayor's Committee recommendation - No guarantee that Eugene's application would be successful in 2006, given limited number of zones available CITY MANAGER'S RECOMMENDATION The City Manager recommends that the City submit an application for designation of an enterprise zone in 2005, consistent with the recommendation of the Mayor's Committee on Economic Development. L:\CMO\2005 Council Agendas\M050307\S050307C.doc SUGGESTED MOTION Move to direct the City Manager to bring back a recommendation for establishing job quality standards applicable to enterprise zone greenfield development projects, and bring back a resolution in support of submitting an application to the State of Oregon for designation of an enterprise zone in 2005, jointly sponsored with and supported by Lane County, based on the recommendation of the Mayor's Committee on Economic Development, with the boundary as proposed in Attachment A of this agenda item. ATTACHMENTS A. Recommended Enterprise Zone Boundary B. Alternative Enterprise Zone Boundary C. Questions and Issues from February 16 Meeting FOR MORE INFORMATION Staff Contact: Denny Braud Telephone: 682-5536 Staff E-Mail: denny.braud~ci, eugene, or.us L:\CMO\2005 Council Agendas\M050307\S050307C.doc ATTACHMENT A Recommended ' Zone' West Eugene Enterprise Zone Boundary ~J Eugene Urban Growth Boundary -- -- ~ Miles 0 O,3 0.6 0.9 1,2 Total d~ Eugene Oty L/m/ts Acerage: 5946 Square Niles: 9.29 C/ty of Eugene ,: .......... ~, Plann/ng and Developmen~ February 8, 2005 ......... Restricted Boundary "Removal of Greenfields" ATTACHMENT B Eugene Urban Growth Boundary o 0.3 o.6 o.9 ' Enterprise Zone with Removal of Greenfields City of Eugene Greenfield Acreage of Re~ri~ed ~unda~ Zone: ~160 Nanning and Development Re~ricted Bounda~ Greenfield Acerage: 785 Febn]a~ 8, 2005 ATTACHMENT C Questions and Issues from February 16, 2005 Meeting: 1. What is the status of the railyard property? Should the property be included within the proposed enterprise zone boundary? The Union Pacific (UP) railyard property is a long narrow series of parcels consisting of approximately 277 acres. There is additional area, in various ownerships, of approximately 98 acres that adjoins the yards and has historically been in rail related uses. This latter area is included within the recent environmental studies on the railyards. In recent discussions, UP staff reviewed some of the current thinking about the future of the railyard property. The UP Real Estate Division, which is responsible for the sale of any surplus property, has not had any of the railyard property released by Rail Operations for marketing and sales. There has, however, been some discussion regarding the sale of a small, single parcel outside of the yards on the north end of the site. UP Rail Operations is currently considering adding track capacity in the yards to address operational issues and increasing regional demand. The remainder of the property is still under consideration for future operational needs. UP Industrial Development staff reiterated this view, stating that no properties within the yard have been made available for sale. Industrial Development staff indicated that they are working with potential lease tenants that have proposed rail related uses (freight, container handling) for portions of the yard property. Inclusion of the UP railyard property in the proposed enterprise zone will not determine the future use of the property. The railyard currently has no zoning designation, as rail lines are treated similar to public right-of-way. The Metro Plan designates the railyard as suitable for heavy industrial. A formal zoning process for railyard properties will need to occur prior to any future non-rail development of the property. Determining the appropriate zoning and other necessary land use actions may be dependant, in part, on the specific area of land to be sold and the redevelopment plan proposed by a future buyer. Staff is recommending that the railyard property be included in the proposed enterprise zone boundary. The enterprise zone program specifically prescribes the types of business activities (manufacturing, processing, headquarters, distribution, warehousing, call-centers) that are eligible for tax exemption benefits. If future zoning of the railyard property allows for business activities prescribed in the enterprise zone program, the tax exemption benefits could be used to help offset the significant redevelopment costs expected with this property. If future zoning does not allow for eligible enterprise zone business activities, the tax exemption benefits would not be available even though the property is included within the zone boundary. 2. What is the impact of applying the "job quality standards" (additional local criteria) to all investments made within the proposed enterprise zone? The Mayor's Committee recommended that job quality standards apply to investments occurring on greenfield sites. Council discussed an alternative concept which would eliminate greenfield sites from the proposed enterprise zone boundary, and apply j ob quality standards to all investments made within the zone. It is assumed that job quality standards will include provisions for attractive wages and benefits, and that all companies would receive a minimum of two-thirds of the tax exemption benefit. Companies not meeting the job quality standards would be subject to a payment of up to one-third of the tax exemption benefit. Experience suggests that larger companies with greater financial capacity are much more capable of meeting job quality standards. The largest companies (Hynix for example) would have the greatest opportunity to meet job quality standards, and would likely receive the full tax exemption benefit. Experience also suggests that smaller companies are much more challenged in meeting job quality standards. Therefore, it would be expected that these smaller companies would receive a smaller proportional tax exemption benefit. An objective included in the City's Growth Management Policies is the support and promotion of local small businesses. The enterprise zone short-term tax exemption is an incentive for companies to make capital expenditures that increase production capacity, increase employment, and ultimately elevate wages as a result of increased production. Small businesses typically experience greater financing and economic barriers associated with these capital expenditures. Therefore, the recapturing of a portion of the tax exemption benefit from these smaller companies could inhibit their ability to expand. It is important to recognize that any recaptured tax exemption benefit would come in the form of a payment in lieu of taxes directly to the zone sponsor, and that all investments would be fully tax exempt for tax assessment purposes (i.e. the tax assessor cannot grant a partial tax exemption under the enterprise zone program). A prior ruling in the Oregon Tax Court determined that dollars recaptured by the zone sponsor must be used for the public purpose of providing opportunities for groups of persons to obtain employment. Because a greater proportion of the recaptured dollars would likely come from smaller companies, the policy issue is whether or not these limited recaptured dollars are best used to support these smaller companies (i.e. granting a full tax exemption), or utilized for an employment- related public purpose considered to be a higher priority. It is also important to recognize that the City will be responsible for monitoring compliance with locally adopted job quality standards. Historically, there have been a significant number of new jobs created in the program. If all new jobs are required to be monitored over a three year period, City staff will need to spend a considerable amount of additional time and resources administering the program. 3. How "development ready" are the greenfield properties identified in the restricted boundary option? Awbre¥ Lane Property: The largest industrial greenfield site is the 229 acre Awbrey Lane property owned by Metropolitan Wastewater Management Commission, located at the northern most area of the proposed enterprise zone. The site has significant development constraints, including an estimated 100 acres of wetlands, which have not yet been designated. The City will be making recommendations regarding wetland designations for this area within the next twelve months. Future development of the site would require a more detailed study of the wetland areas, and most likely require significant mitigation costs. Development of the site would also require significant water, sewer and road infrastructure improvements. South of Awbre¥ Lane: There is an additional 382 acres of industrial property in the area south of Awbrey Lane and north of Enid Road, a majority of which is greenfield acreage. There are 7 greenfield properties greater than 10 acres in this area. However, there is only approximately 50 acres that do not appear to have development constraints. Development constraints on the remaining properties include access, utilities, and wetlands. Because the concentration of wetlands is relatively small in this area, it is assumed that most could be mitigated for future development. West 11th and Willow Creek: The greenfield area identified south ofW. 11th Avenue and east of Willow Creek includes approximately 62 acres of industrial property. Although the property has been designated for development in the West Eugene Wetland Conservation Plan, it has a very high concentration of wetlands which will create significant mitigation costs in the event that development occurs on the site. Willow Creek South: The southern most area of the Willow Creek industrial area that has been identified as greenfield includes approximately 113 acres. A major portion of this property includes restored wetlands, and wetlands designated for protection in the West Eugene Wetland Conservation Plan. It is not likely that this area will be developed in the near future.